Rick's Tax Mix Nixed (Too Quick?)

Regressive Tax Swap Idea Dies a Speedy Death; Why Don’t I Feel Happy?

At a public forum last week, Rick Chandler, a member of the Governor-elect’s transition team, floated the idea of increasing the sales tax by at least two cents – as part of a plan to pay for significant reductions in income and property taxes. Within less than 24 hours the idea had been trashed by liberals and conservatives, and most importantly by the Governor-elect, and it was declared dead almost before the public even got wind of the proposal.

Because such a change would result in a substantial shift in taxes to lower income Wisconsinites, I wrote a critical op-ed column a couple of months ago, soon after the general idea first surfaced. So perhaps I ought to be celebrating the proposal’s speedy demise, but instead I’m concerned that any idea to raise a tax, even as part of a revenue-neutral proposal, is immediately denounced, before there’s a chance to examine the proposal’s merits and debate it in a rational way.

Sales Tax Loophole Means State Loses Revenue

Today is “Cyber Monday,” one of the biggest days of the year for making online purchases. Due to a loophole in sales tax regulations, the state misses out on revenue that would otherwise be generated by state residents making purchases on the Internet. The state of New York has won a court case against Amazon.com that will make it more likely that states can collect sales tax on online purchases, but Amazon is expected to continue to make colleting those taxes very difficult for most states, unless they work together.

Food Security in Wisconsin

With Thanksgiving two days away, the mind naturally turns to food.  So we've been contemplating important food-related public policy issues, such as whether it’s better to put the stuffing in the bird or roast it alongside. Also: will the new legislature have the courage to address the long-unsettled issue of cranberry sauce made from a can vs. homemade?

Those important topics led us to wonder about food security in Wisconsin during the recession, and a new WCCF blog post takes a look at that issue, as well as the sharp increase since 2008 in FoodShare participation.  It summarizes a USDA report released earlier this month, which shows that the share of Wisconsin households with any food insecurity increased from an average of 8.9 percent over the 2004-06 period to 11.4 percent in 2007-09, a statistically significant jump.  Fortunately, the state has made great strides in improving enrollment in FoodShare over the last couple of years, which we suspect will turn around the upward trend in food insecurity -- and for that we are very thankful.   

Read more in the WCCF blog post.

U.S. Senate Approves TANF Extension, but Ends Contingency Funds

The U.S. Senate unanimously passed legislation Friday that would extend the basic federal welfare program, known as Temporary Assistance for Needy Families (TANF), through Sept. 30, 2011. The one-year extension is a stop-gap measure, in lieu of a 5-year reauthorization. The House is expected to concur in the bill during the lame duck session.

Unfortunately, the bill does not revive the TANF emergency contingency fund (ECF) and it cuts off funding for the regular Contingency Fund.  The ECF, which was passed as part of the 2009 Recovery Act, enabled states to place adults with private employers and youth in summer jobs programs. That funding expired at the end of September, after Republicans blocked attempts to extend it.

DOA Estimates a $2.2 Billion Deficit at the End of 2011-13

It seems strange to hail as positive news that Wisconsin faces a budget deficit of $2.2 billion over the 2011-13 biennium. But that estimate, released today by the Wisconsin Department of Administration (DOA), is less than we would have guessed and less than the $3.1 billion estimated by a prominent Wisconsin economist two months ago.

However, before we breathe a big sigh of relief, it should be noted that the DOA calculations leave out a number of factors that are likely to increase the size of the state’s revenue shortfall -- even without factoring in the proposals by incoming lawmakers to cut taxes.

Review Gives Two Thumbs Down to State Film Production Subsidies

Lights, cameras, ….fraction!  As the cameras roll, costs climb for taxpayers in the many states that pick up the tab for a large fraction of film production expenses incurred in their states. That was true for a short time in Wisconsin, but Governor Doyle and a majority of state lawmakers yelled “cut” last year after a Department of Commerce analysis found the rapidly rising tax subsidies to be an ineffective form of economic development spending.

The issue is likely to emerge again next year because some of the newly elected lawmakers would like to give the film subsidies a new run. With that in mind, it's worth noting that the Commerce Department’s study was buttressed this week by a report from the Center on Budget and Policy Priorities (CBPP), titled “State Film Subsidies: Not Much Bang for Too Many Bucks.”  The CBPP report begins with this introduction:

“Like a Hollywood fantasy, claims that tax subsidies for film and TV productions — which nearly every state has adopted in recent years — are cost-effective tools of job and income creation are more fiction than fact. In the harsh light of reality, film subsidies offer little bang for the buck.”

WCCF Blog Examines Health Insurance Trends and Rebuts Misperceptions

A new post on the WCCF blog examines the trends in private and public insurance in Wisconsin over the last decade and particularly during 2008 and 2009. It pulls together the findings from a report issued Tuesday by the Economic Policy Institute and other Census Bureau data, as well as a September Kaiser Commission report that drew attention to the very large increase in Medicaid participation in Wisconsin.

Notwithstanding the rapid growth in BadgerCare Plus since the end of 2007, our analysis shows that participation in Wisconsin’s Medicaid-related programs is not out of line with other states, and Wisconsin is still well above the national average in the portion of non-elderly residents with employer-sponsored insurance.

Read more here.

New Report Makes a Business Case for Letting High-End Tax Cuts Expire

A report released Tuesday finds that it makes good business sense to let the high-end Bush tax cuts expire on December 31. The report by Business for Shared Prosperity, says families should keep tax cuts on their income below $250,000, but well-off taxpayers should not get extra tax cuts that won’t create jobs and will cost $700 billion over the next decade.

The report, which is titled The Business Case for Letting High-End Tax Cuts Expire, contends that rather than extending the high-end tax cuts, Congress should build on constructive action like the Small Business Jobs Act and infrastructure investment needed to create jobs and be competitive in the global economy.

What is Next for Federal Unemployment Benefits?

Congress is in a state of flux right now, and some lawmakers are advocating holding off making any important decisions until after the newly-elected senators and representatives are seated. But there are several important issues that Congress is going to have to address before the end of the year, either by omission or commission.

One issue is whether to extend the Bush tax cuts, which expire at the end of the year. Before that though, Congress will have to consider whether to extended federal unemployment benefits for the long-term unemployed. If Congress takes no action, these benefits will run out at the end of November.

Voters Give Boost to Constitutional Protection for Transportation Dollars

A proposed amendment to the Wisconsin Constitution got a boost Tuesday from the voters in all of the 53 counties that put the proposal to an advisory vote.  The measure would prevent state lawmakers from transferring dollars from the Transportation Fund to use for other purposes.  Governor Dole and the legislature used such transfers to help the state close holes in the General Fund budget, to the consternation of highway builders and other supporters of transportation spending. 

Advisory referendums often don't have much impact, but in this case I think the proposal has an excellent chance of becoming part of the state constitution.

Despite Conservative Mood of Voters, Many School Referendums Pass

Voters in Wisconsin yesterday were in a decidedly conservative mood when it came to choosing their governor, senator, attorney general, and other elected representatives. That would seem to spell defeat for the school referendums on the ballot, but in fact voters approved tax increases in more than half the districts that were seeking increased school spending.

New Estimate for Cost of Extending Bush Tax Cuts

There are only 58 days until the Bush tax cuts of 2001expire. There has already been considerable debate about whether and for whom the tax cuts should be extended. Now that the election season is over, we can expect to hear a lot more about the pros and cons of extending portions of the tax cuts. There’s fairly widespread agreement that the tax cuts for the middle class will be extended, but it’s less clear what will happen to the tax cuts for the wealthy.

Proponents of extending the cuts for the wealthy argue that such cuts will help bolster the economy and create jobs, while opponents point to the impact the cuts for the wealthy will have on the deficit. A new report by the Congressional Research Service estimates that extending all the tax cuts will cost $5.0 trillion over the next ten years, much higher than the $2.8 trillion figure the Congressional Budget Office has been using. (The higher figure includes the cost of servicing the debt due to lost revenue, as well as indexing the alternative minimum tax to inflation).